In short
The seller hid a defect in a resale apartment. Is the seller liable?
Generally, yes. Under section 16 of the Sale Law, 5728-1968, a seller is liable for a non-conformity arising from facts the seller knew or should have known and did not disclose to the buyer, even when the contract says the apartment is sold AS IS. A buyer who discovers a defect after moving in should notify the seller in writing right away, document the defect and get an engineer's opinion, and then demand repair, a price reduction or compensation.
The Krayot Magistrate's Court recently ordered the sellers of an apartment in Haifa to pay the buyers NIS 265,000 because they knew about dampness in the apartment and did not disclose it. Nitzan Shapir reported the ruling in Globes on November 5, 2026, in a weekly column that summarizes three court decisions. The case is fairly routine, and that is precisely what makes it instructive: hidden defects in a resale apartment are among the most common sources of disputes between buyers and sellers, and the question of who bears them is not decided by who noticed them first. It is decided by what the seller knew, and by what the seller chose not to say.
A buyer of a new apartment from a developer enjoys a detailed set of protections, with inspection and warranty periods set out in the Sale (Apartments) Law, 5733-1973. A buyer of a resale apartment faces a different picture. There is no inspection period and no developer obliged to come back and repair, and the contract itself often declares that the buyer “saw and inspected” the apartment and is buying it “in its present condition.” Even so, Israeli law does not adopt the old rule of caveat emptor (yizaher hakoneh). Section 16 of the Sale Law, 5728-1968 makes the seller liable for a non-conformity arising from facts the seller knew or should have known and did not disclose, and that liability prevails even over exemption clauses in the contract.
Hidden defects in a resale apartment in court: the Krayot case
According to the Globes report, the buyers purchased a renovated first-floor apartment in an old building on HaBikurim Street in Haifa in 2021, for NIS 1.75 million. Shortly after taking possession they discovered severe dampness, and they filed a claim for about NIS 344,000, alleging that the sellers had committed a fundamental breach of the sale contract. Senior Judge Eran Naveh (Civil Case 33811-01-24) identified several sources of the dampness, among them the bathrooms, a drainage pipe and an unsealed exterior wall of the balcony.
The finding that the sellers knew of the problem rested on accumulated indications. According to the report, they were aware of earlier legal proceedings concerning dampness in the apartment, their contract contained a clause dealing with dampness, and they knew of a flood in the shelter in 2015. The court held that, under the law and the case law, they were obliged to disclose the apartment's history to the buyers when the contract was signed, and it ordered them to pay NIS 265,000, of which NIS 175,000 was agreed compensation (pitzui muskam), plus attorney's fees. This is a ruling of a trial court and does not create binding precedent. But it applies a principle the Supreme Court established long ago.
The Sale Law: the apartment must conform to what was agreed
The Sale Law applies to every “transfer of property for a price,” in the words of section 1, including the sale of an apartment. Section 11 sets out when the seller has failed to fulfill its obligation: when it delivered property different from what was agreed, property lacking the qualities needed for its ordinary use, or property that does not match a sample shown to the buyer. An apartment whose walls let in water, part of which was built without a permit, or whose drainage system is faulty may be considered a non-conformity (i-hatama) in this sense.
The law imposes duties on the buyer as well. Under section 12, the seller is not liable for a non-conformity of which the buyer knew when the contract was concluded. Section 13 requires the buyer to inspect the property immediately after receiving it, and section 14 requires the buyer to notify the seller of a non-conformity immediately after the time of inspection or immediately after discovering it, whichever is earlier. A buyer who failed to give notice may not rely on the defect.
A latent defect, one that could not have been discovered by reasonable inspection, is governed by section 15. The buyer may rely on it even without having given notice at the time of inspection, provided notice was given immediately upon discovery. In a sale of real property the section sets a time limit: notice given more than two years after delivery of the property does not allow the buyer to withdraw from the contract, and notice given more than four years after delivery bars the other remedies for the breach as well.
Section 16 of the Sale Law: the apartment seller's duty of disclosure
This is where the provision that decides many of these disputes comes in. Section 16 addresses a non-conformity arising from facts the seller knew, or should have known, when the contract was made, and did not disclose to the buyer. In such a case, the section provides:
the buyer may rely on it notwithstanding sections 14 and 15 or any agreement
The meaning is twofold. The seller cannot defend by arguing that the buyer failed to inspect properly or to give notice at the time of inspection, and a contract clause releasing the seller from liability does not help. One duty remains with the buyer even here: to notify the seller immediately after discovering the defect. The wording of the section also indicates that the two-year and four-year limits of section 15 do not bar a buyer from whom the seller concealed the defect.
The Supreme Court interpreted the section in C.A. 8068/11 Eini v. Shifris, decided on February 11, 2014. In that case a two-story house in Yehud was sold. In the contract the sellers declared that the house had been built under a permit and that they knew of no illegal construction or hidden defect, and the memorandum of understanding stated that the property was sold “AS IS” and that the buyer had inspected it and found it suitable. In fact, the second floor did not appear in the building permit. The district court ordered the sale cancelled and the price returned, and the sellers appealed.
By a majority, the Supreme Court dismissed the appeal. Justice Noam Sohlberg, joined by Justice Hanan Melcer, held that section 16 is a mandatory provision that cannot be contracted out of, and that “only actual knowledge of the buyer” of the non-conformity will exclude its application. The buyer's negligence, even gross negligence, does not save the seller. Justice Elyakim Rubinstein, in dissent, proposed attributing contributory fault to the buyers and dividing the liability. The gap between the opinions reflects the tension at the heart of the issue: how far the law should protect a buyer who could have discovered the truth with a simple check, as against a seller who knew it and chose to remain silent.
What an AS IS clause in the sale contract is worth
Most contracts for the sale of resale apartments include standard language: the buyer saw and inspected the apartment, found it suitable for the buyer's purposes and waives any claim of defect or non-conformity. Such a clause is not worthless. It strengthens the seller's position with respect to visible defects that anyone walking through the apartment would have seen, and with respect to what the buyer actually knew. But it does not cover what the seller knew and concealed. In the Eini case the court held that the contractual provision gives way to the mandatory statutory rule, so the buyer's general declaration that he had inspected the property did not prevent him from suing.
From the seller's point of view, the practical conclusion runs against intuition. The way to protect oneself is not a broader exemption clause but detailed disclosure: listing in the contract the known defects, the repairs carried out and the proceedings that took place, and attaching the documents. A defect disclosed in writing becomes a fact the buyer knew when the contract was concluded, and under section 12 of the Sale Law the seller is not liable for it.
Alongside the Sale Law stand the general rules of contract law. Section 12 of the Contracts (General Part) Law, 5733-1973 requires each party to negotiations to act in a customary manner and in good faith, and a party that breaches this duty is liable for damages. Section 15 of the same law allows a party to cancel a contract made as a result of misrepresentation, and makes clear that misrepresentation includes the failure to disclose facts that, by law, custom or circumstances, the other party should have disclosed. Under section 20, notice of cancellation must be given within a reasonable time after the ground for cancellation became known. And a seller who expressly declared in the contract that the apartment has no dampness or building violations, where the declaration proved untrue, may be found in breach of an express contractual undertaking even before the question of what the seller knew is examined.
Inspection before signing: what the buyer does on their own
The protection of section 16 is broad, but it is no substitute for inspection. Suppose a buyer of a ground-floor apartment notices fresh paint on one wall of the living room and does not ask about it. If it later turns out that the seller knew of dampness and painted the wall to hide it, the law will be on her side. But until that is decided she will have to prove what the seller knew and conduct legal proceedings at her own expense, and meanwhile live in a damp apartment. A good inspection before signing spares her all of that.
Such an inspection usually includes a home inspection by an engineer or a licensed inspector, and in older apartments a moisture test with suitable equipment as well. It includes a review of the building file at the local authority's engineering department, to confirm that the apartment matches the permit, and written questions to the seller: whether there was dampness and when, what repairs were carried out, whether there were legal proceedings or insurance claims concerning the apartment. The answers go into the contract as express representations of the seller, and so become undertakings. Whatever the inspection reveals is treated as known to the buyer, so the financial consequences of such a finding are settled in the price or in the contract, not in court. The other stages of a real estate transaction, from the land registry extract to the cautionary note, are covered on the site, and full definitions appear in the glossary.
You discovered a defect after moving in: notice, documentation and remedies
The first step is written notice to the seller immediately after the discovery. Section 17 of the Sale Law requires the notice to describe the non-conformity with reasonable detail and to give the seller a reasonable opportunity to inspect the property. A buyer who waits months, or repairs the defect without documenting it and without giving notice, may lose claims that were available. So document with photographs, commission an engineer's report that identifies the source of the defect and estimates the cost of repair, and keep all correspondence. Where damage is ongoing, such as water seeping into the walls, act to limit it, but only after proper documentation.
The remedies depend on the severity of the defect and on the wording of the contract. Section 28 of the Sale Law allows the buyer, where the seller did not cure the non-conformity within a reasonable time after being asked to do so, to deduct from the price the amount by which the value of the property decreased. The Contracts (Remedies for Breach of Contract) Law, 5731-1970 adds the right to damages for loss the breaching party foresaw or should have foreseen (section 10), and the agreed compensation set in the contract, which is payable without proof of damage, although the court may reduce it if it bears no reasonable relation to the loss that could have been foreseen (section 15). That is what happened in Krayot, where agreed compensation of NIS 175,000 was awarded.
Cancellation of the entire transaction is generally reserved for a fundamental breach, that is, a breach that a reasonable person would not have entered into the contract had he foreseen it (sections 6 and 7 of the Remedies Law). It is a step that means returning the apartment and the money, and it suits mainly cases where the defect goes to the heart of the transaction, such as an entire floor built without a permit. When the seller does not respond to the demand, the decision moves to the court, where the main battle is usually over the evidence of the seller's knowledge; the stages of a civil proceeding are described on a dedicated page.
Beyond the duty of immediate notice, a monetary claim for breach of the sale contract is subject to the Limitation Law, 5718-1958: seven years for a claim that does not concern land (section 5), counted from the day the cause of action arose (section 6). Section 8 provides that where the plaintiff did not know the facts constituting the cause of action and could not have known them with reasonable care, the limitation period begins on the day the plaintiff learned of them. With a concealed defect, the question of when the buyer learned of it is often the central question.
When the dampness comes from the building, not the apartment
Not every case of dampness is a matter between buyer and seller. When the water comes from the roof, the exterior walls or pipes serving the whole building, it involves the common property (rechush meshutaf), and its repair falls on all the apartment owners through the representative committee, as we explained in the article on leaks from a neighbor and water damage in a condominium. The two routes do not conflict: the buyer may require the committee to repair the roof and at the same time sue the seller if the seller knew of a recurring problem and concealed it. A professional diagnosis of the source of the dampness is the starting point for both.
Every dispute over hidden defects in a resale apartment is ultimately decided on the details: what the contract says, what was said in the negotiations, what the seller knew and what could be seen with the naked eye. A buyer who discovered a defect after moving in, or a seller about to sell an apartment and unsure what must be disclosed, may contact the firm to have the documents and circumstances of the specific case reviewed before sending a notice or making a decision.
Questions and answers
Must an apartment seller disclose dampness that was repaired in the past?
The law does not list the matters a seller must disclose. The test is whether there is a non-conformity arising from facts the seller knew or should have known. Dampness that was properly repaired and does not recur is not necessarily a non-conformity, but dampness that returns every winter, or a history of legal proceedings over it, is a very different matter. In the Krayot ruling reported by Globes on November 5, 2026, the court held that the sellers were obliged to disclose the apartment's history to the buyers. A seller who discloses in writing and records the disclosure in the contract reduces the risk of a claim.
What does an AS IS clause in an apartment sale contract mean?
An AS IS clause, or a clause stating that the buyer “saw and inspected” the property, provides that the buyer takes the apartment in its present condition and waives claims over defects. It strengthens the seller's position with respect to visible defects and to what the buyer actually knew. It does not release the seller from liability for a defect the seller knew of and concealed, because section 16 of the Sale Law applies “notwithstanding... any agreement.” That is what the Supreme Court held in C.A. 8068/11 Eini v. Shifris.
How long do I have to sue the seller over defects discovered after the purchase?
First, you must notify the seller in writing immediately after discovering the defect, or the claim may be barred. For a latent defect the seller did not know of, section 15 of the Sale Law provides that in a sale of real property, notice given more than two years after delivery does not allow rescission of the contract, and notice given more than four years after delivery bars the other remedies as well. Where the seller knew and concealed, section 16 applies notwithstanding these time limits, but the duty of immediate notice remains. The general seven-year limitation period also applies, and in certain circumstances it runs only from the day the buyer learned the facts.
Can I cancel the purchase because of a defect the seller concealed?
Cancellation is possible where the breach is fundamental, meaning that a reasonable person would not have entered into the contract had he foreseen it, and also where the contract was made as a result of misrepresentation, which includes failure to disclose facts that had to be disclosed. Notice of cancellation must be given within a reasonable time after learning of the ground for cancellation. In the Eini case, where an entire floor did not appear in the building permit, the district court ordered the sale cancelled and the Supreme Court dismissed the sellers' appeal. In most cases, however, the buyer chooses to keep the apartment and claim compensation or a reduction in price.
Is a home inspection required before buying a resale apartment?
The law does not require one, and a buyer who did not inspect does not thereby lose the protection of section 16 against a seller who concealed a defect. Still, a professional inspection before signing is the only way to know in advance what you are buying and to price it accordingly. Whatever the inspection reveals is treated as known to the buyer, so it can be settled in the price or in the contract rather than litigated later.
What should I do right away when I discover dampness or a defect after moving in?
Document it with photographs, commission an engineer's report that identifies the source of the defect and estimates the cost of repair, and send the seller written notice that specifies the defect and gives the seller an opportunity to inspect it, as section 17 of the Sale Law requires. Where damage is ongoing, take steps to limit it once the condition has been documented. If the source of the dampness is in the common property, such as the roof or the exterior walls, contact the condominium's representative committee as well.
Sources
- Globes, Nitzan Shapir: The sellers did not disclose the dampness in the apartment. What compensation will the buyer receive? (Hebrew), 5.11.2026
- C.A. 8068/11 Eini v. Shifris, Supreme Court (Judicial Authority website) (Hebrew), 11.2.2014
- Sale Law, 5728-1968 (text as enacted, Knesset website) (Hebrew), 1968
- Contracts (General Part) Law, 5733-1973 (Wikisource, Open Law Book) (Hebrew), checked 8.11.2026
- Contracts (Remedies for Breach of Contract) Law, 5731-1970 (text as enacted, Knesset website) (Hebrew), 24.12.1970
- Limitation Law, 5718-1958 (text as enacted, Knesset website) (Hebrew), 1958
This article provides general information and is not a substitute for legal advice on your specific matter. More on Real Estate Transactions · Contact the firm
First published in Hebrew. Read the Hebrew original